Volatile trading is expected to continue in the Tokyo market as fears of a global economic downturn are unlikely to be erased by the financial crisis summit at the weekend, analysts said Friday. Leaders of the Group of 20 rich and emerging economies will meet in Washington to craft a joint strategy to deal with the rapidly spreading global financial crisis.
But dealers say they do not expect the summit to prevent the ongoing financial meltdown from turning into a long recession. "So far it seems unlikely that the leaders come up with something which is efficient to erase worries over the economy and financial system," said Shinichi Ichikawa, equity strategist at Credit Suisse.
But with US President George W. Bush due to leave the White House in January, and president-elect Barack Obama not yet in office, prospects of a clear action plan involving the United States are uncertain, dealers said.
"The G20 is too big a group to make decisions. In addition, the Bush administration at the moment cannot take strong leadership as it is already in the power-transition period, while president-elect Obama is not ready to make a commitment yet," said Ichikawa Over the week to November 14, the benchmark Nikkei-225 index fell 120.61 points or 1.41 percent to 8,462.39, after a 0.07 percent rise the previous week.
The Topix index of all first section shares dropped 32.09 points or 3.65 percent to 846.91, after a 1.37 percent gain the previous week. "It doesn't seem like share prices are reflecting corporate earnings or prospects for economic growth," said Fujio Ando, fund manager at Chiba Bank Asset Management, noting that the Tokyo market has shown wild swings recently.
For the coming week, Ando predicts the Nikkei index will move within a range of 8,000-9,500 points. Dealers will pay close attention to gross domestic product figures due on Monday, although average market forecasts are for modest economic growth in the third quarter, allowing Japan to narrowly avoid a technical recession. The Bank of Japan meanwhile will hold a two-day monetary policy meeting through Friday. Last month it cut its super-low interest rates for the first time in seven years, by 20 basis points to 0.30 percent.